RETAIL opportunities are growing in Southeast Asia’s property sector due to the region’s strong consumer market, particularly in populous countries such as the Philippines and Indonesia, according to a report by global real estate services firm Jones Lang Lasalle.
JLL head of research for Southeast Asia Dr. Yang Liang Chua noted that the recent real estate deals made in the region highlight the confidence of investors in the potential of retail opportunities in Southeast Asia.
Some of the transactions cited by Chua include Alibaba’s taking a majority stake in Singapore-based Lazada.com, Chinese online computer retailer JD.com creating a sub-domain for Indonesia, and the expansion of SM Mall of Asia in the Philippines, which could become the world’s largest mall with an estimated gross floor area of more than 600,000 to 700,000 square meters.
Chua noted that retail opportunities are particularly the strongest in Indonesia and the Philippines due to their growing urban population.
“Jakarta and Manila have more than 140 million and 45 million urbanites, respectively, and are expected to grow at an average of 0.9 to 3.2 million people per annum between now and 2025,” Chua noted.
Aside from the growing population, Chua said both Jakarta and Manila possess highly literate young adults, with literacy rates at 94 and 96 percent, respectively.
“Continual urbanisation with a young and educated population will support economic growth in these cities,” Chua said. “As individuals accumulate wealth and income grows, discretionary spending is likely to increase and drive both online and physical retail demand.”
Chua noted that the emergence of foreign brands in Manila and Jakarta are a testament to retailers’ confidence in these two consumer markets.
In a separate report, Cushman and Wakefield agreed with Chua’s observations, noting that Manila’s retail sector is being fuelled by the entrance of foreign brands into the country.
“Robust activity due to healthy domestic consumption on the back of higher income from remittances and the BPO industry,” Cushman and Wakefield said.
In another report, global real estate advisor CBRE noted that the expansion of both local and foreign retail brands in the Philippines are driven by strong household consumption and steady growth in remittances from overseas Filipinos.
“Taking advantage of the robust demand from consumers and seeing this continuing, developers have been announcing their retail expansion plans which are expected to traverse in the coming quarters,” said CBRE
However, Chua noted that despite the huge potential of the Southeast Asian retail market, the region faces several challenges when it comes to e-commerce, citing the weak infrastructure and low network-readiness in most countries except for Singapore and Malaysia.
“Governments could liberalise and invest more into their Information and Communication Technology industry and infrastructure, and adopt national logistics policies that focus not only on physical transportation but issues faced by traders and logistics service providers, to help facilitate the growth of e-commerce in SEA,” Chua concluded.